The Cabinet is likely to approve a proposal to allow foreign direct investment (FDI) in Limited Liability Partnership firms tomorrow.

“The proposal to allow FDI in LLPs in on the agenda of the Cabinet. It is likely to be approved,” a source said.

Giving go ahead to FDI in LLPs would enable them to choose among domestic and foreign investors and make these more competitive. This move will also encourage more partnership firms to convert into LLPs.

LLP is a new business structure that has hybrid features of partnership firm and a corporate body — a company”s limited liability and the flexibility of a partnership firm.

The idea behind the new form was to provide professionals like lawyers and chartered accountants with an opportunity to become a single-window facility by providing comprehensive consultancy service.

The Ministry of Corporate Affairs (MCA) is believed to have already given in-principle approval to allow FDI in LLPs.

The ministry”s view is that allowing FDI in LLPs would provide flexibility to these firms and make them more competitive globally. This would encourage more partnership firms to convert into LLPs.

As on May 2 as many as 4,679 LLPs were registered with the Ministry of Corporate Affairs.

Earlier, the Department of Industrial Policy and Promotion (DIPP) in the industry ministry had circulated a note across various ministries including MCA and the ministry of finance to discuss the possibility of allowing FDI in LLPs.

The RBI has also given its view on issue.

In the Budget 2011-12 the government brought LLPs under the ambit of minimum alternative tax (MAT).

The DIPP”s discussion paper floated last year had indicated that at best foreign direct investment in the LLPs be allowed in sectors which are completely open for FDI. PTI